Losses mounted at Canada's largest metropolitan newspaper chain in the last quarter, despite aggressive cost-cutting and the introduction of digital subscriptions at each of its newspapers.
Postmedia Network Inc.'s $112-million loss underscores the speed at which the newspaper market is transforming, with advertisers directing more of their budgets toward digital media and print publishers in constant restructuring mode.
The publisher of such titles as the Ottawa Citizen, Calgary Herald and National Post took a writedown of $94-million, as it acknowledges on paper that its assets won't be as profitable as the past. It also booked nearly $17-million in restructuring and other charges, partly because of staff cuts in a program to chop operating costs by up to 20 per cent.
The problem for publishers across North America is that digital revenues are not increasing fast enough to make up for the losses in print. For Postmedia, print advertising declined by $17.6-million in the quarter to $113-million, while digital revenues increased by only $500,000 to $24-million.
"With print in decline and the fact that it seems to be more structural than recessionary we're all wondering how newspapers are going to achieve the levels of success they've had in the past," chief executive officer Paul Godfrey said in an interview. "The hope has always been that we return to the days of the cash register ringing just because we put out a paper each day, but that's become a dream of the past."
A year ago the company said it wanted to cut $120-million out of its operating budget within three years. It said yesterday it had managed to find $62-million in savings so far through a series of changes that has seen some papers cut publishing days, the publisher position eliminated at most of its dailies, millions of dollars cut from the payroll and real estate sold.
The company also introduced electronic subscriptions to its network of websites, charging up to $10 a month for digital access for those who don't subscribe to home delivery of the company's newspapers. It said 100,000 readers have registered so far, although most are print subscribers who have activated their free memberships.
The country's other major publishers, including The Globe and Mail and Sun Media, have also started charging their online readers. Canada's largest daily, the Toronto Star, has said it will bring in its own paywall by the end of the year, and could provide an update at the end of the month.
Postmedia earned 59 per cent of its revenue from print advertising, a ratio Mr. Godfrey said could settle in around 40 per cent by the time the company restructures and asks readers to pay a greater share of the company's newsgathering costs.
Mr. Godfrey – who recently signed a three-year contract extension – wouldn't specifically outline the company's next cost-saving moves. But there will be changes, he said, and they will come quickly as the company continues looking for ways to return to a profit and pay down its $470-million debt.
"Cutting is a painful way for the remaining profitable players to pay for debt," he said. "It's painful dealing with people's lives and there's never a good feeling when you are letting people go. But we will outsource where we see the ability to outsource, I think there's always more room for that."